Question

You purchased 1,000 shares of stock at $42 a share. The stock is currently selling for $45 a share. The initial margin was 70 percent and the maintenance margin is 30 percent. What is your current margin position?

Answer 1

Answer :

Here, we are given that,

Shares purchased = 1,000

Price per share = $42

Selling price = $45

Initial margin = 70%

Maintenance margin = 30%

Now,

Current Equity value = Market value of shares - Margin loan

= [ 1,000 * $45 ] - [ 1,000 * $42 * ( 1 - 70% ) ]

= $45,000 - $12,600

= $32.400

Therefore,

Margin position = Current Equity value / Market value of shares

= $32,400 / $45,000

Margin position = 72%